REPORT INTEGRATED - samro
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INTEGRATED REPORT 2018
CONTENTS
ABOUT THIS REPORT 1
Financial information 1
Reporting frameworks and regulations 1
Assurance 1
Approval of the integrated report 1
2018 AT A GLANCE 3
Distributions for the year to 30 June 2018 3
Our performance in numbers 3
Why become a member 4
ORGANISATIONAL REVIEW 5
CHAIRPERSON’S REPORT 6
OUR VALUE CREATION PROCESS 9
Stakeholder engagement 12
Material matters 14
Strategy 15
CHIEF EXECUTIVE OFFICER’S REPORT 16
Value added statement 21
OUR SOCIAL IMPACT 22
The SAMRO Foundation 23
Transformation report 28
Our people 30
HOW WE ARE GOVERNED 32
Effective and ethical leadership 34
Board members 36
SAMRO’S leadership 37
Group operation and management structure 38
Board committees 42
How we ensure good governance 43
RISK REPORT 46
Risk policy and management 46
REMUNERATION REPORT 49
Remuneration strategy and policy 49
Overview of remuneration 49
Directors’ responsibility statement 52
DIRECTORS’ REPORT 53
CERTIFICATE BY COMPANY SECRETARY 54
INDEPENDENT AUDITOR’S REPORT ON THE
SUMMARY CONSOLIDATED AND SEPARATE 55
FINANCIAL STATEMENTS
SUMMARY CONSOLIDATED AND SEPARATE
FINANCIAL REPORTS
56
ABBREVIATIONS AND ACRONYMS 67
CORPORATE INFORMATION 69
In tribute to our members who have passed on 72 & IBC
DEFINITIONS MECHANICAL RIGHTS (also known as reproduction rights) apply when a musical work is legally affixed and/ or reproduced to any medium for public use. Examples include making commercial copies of recordings on cassette, CD, DVD, tape, video, computer hard drives, cell phones (ringtones and track downloads), MP3 players, or any other medium. NEEDLETIME RIGHTS were introduced when the Performers’ Protection Act and the Copyright Act were amended in 2002. These rights entitle performers and record companies to remuneration for the public performance and/or use of their recorded performances. REPROGRAPHIC RIGHTS are administered by the Dramatic Artistic and Literary Rights Organisation (Pty) Ltd (DALRO). We primarily administer reprographic reproduction rights (from published editions), public performance rights (including stage rights for musicals and plays) and reproduction rights (granted for both publishing and copying) in works of visual art. PERFORMING RIGHT The right to have the composition performed in public.
ABOUT THIS REPORT
This integrated report (report) presents the
holistic performance of the Southern African
REPORTING FRAMEWORKS
Music Rights Organisation (SAMRO, the AND REGULATIONS
organisation or the company) and its subsidiaries1 The preparation of this report was guided by the
(the group) for the period 1 July 2017 to 30 June following reporting frameworks and regulations:
2018. Any material events after this date, before
publication, have also been included in the report. • International
Integrated Reporting Council’s
Framework ( Framework)
This report is our primary report to our
• IFRS
stakeholders and outlines our strategy, business
model, sustainability initiatives, governance, • Companies Act
remuneration and risk management. We have • King
Report on Corporate Governance™ for
included commentary from the chairperson and South Africa, 2016 (King IV). Copyright and
the chief executive officer (CEO). trademarks are owned by the Institute of
Directors in Southern Africa NPC and all of its
SAMRO is a non-profit company (NPC) with a
rights are reserved
high public interest score, as defined by the
Companies Act, 71 of 2008, as amended
(Companies Act). ASSURANCE
SAMRO operates in an established control
SAMRO is affiliated to other international
environment, which is documented and reviewed
collective management organisations that regularly. Risk management and internal control
collect licensing income on behalf of composers, procedures are in place to provide reasonable but
authors and publishers (SAMRO members) in not absolute assurance that SAMRO’s risks are
their territories. SAMRO plays a similar role being controlled and assets are safeguarded.
in South Africa on behalf of other collective
PwC will provide external assurance on the
management organisations and makes regular
financial information supplied in the report.
distributions to them in return.
APPROVAL OF THE
FINANCIAL INFORMATION
We apply International Financial Reporting
INTEGRATED REPORT
Standards (IFRS) and our financial statements The board of directors (the board) is responsible
are publicly available on www.samro.org.za. The for the integrity and completeness of this report.
reporting structure, content and data of our The board applied its collective mind to the
summarised financial statements are comparable preparation and presentation of the report and
to previous reports. PricewaterhouseCoopers accordingly approved the 2018 integrated report
Incorporated (PwC) audited SAMRO’s summary for publication. The board believes the report was
consolidated and separate financial statements prepared in accordance with the Framework.
and its independent report to SAMRO members Signed on behalf of the board:
is available on page 53.
Jerry Mnisi Nothando Migogo
Chairperson Chief executive officer
27 November 2018 27 November 2018
1
he SAMRO Foundation, DALRO, Arab Emirates Music Rights
T
Organisation (AEMRO), SAMRO House Holdings (Pty) Ltd and
SAMRO House (Pty) Ltd. Dormant/Inactive subsidiaries: SAMRO
IP Technologies and Gratia Arts.
Integrated Report 1
Pixel Kollective x Homecoming Events
2018 AT A GLANCE
DISTRIBUTIONS FOR THE YEAR
TO 30 JUNE 2018
CATEGORY DISTRIBUTION DATE OF CREDIT Total available for distribution
Foreign (Seq 1) FY2018 2017/07/11 R336,8 million
Post (Seq 1) FY2018 2017/07/29 (2017: R351,8 million)
Post (Seq 2) FY2018 2017/08/29
Fees in error (Seq 1) FY2018 2017/08/30
Foreign (Seq 2) FY2018 2017/09/12
Supplementary NS1 (Seq 1) FY2018 2017/09/18
Film FY2018 2017/10/04
Post (Seq 3) FY2018 2017/10/18
Cost-to-income ratio
Foreign post (Seq 1) FY2018 2017/10/31
Royalty adjustment (Seq 1) FY2018 2017/11/03
40%
Grant of rights payment FY2018 2017/11/07 (2017: 38,6%)
Performance adjustment FY2018 2017/11/29
(Seq 1)
Post (Seq 4) FY2018 2017/12/20
Post (Seq 5) FY2018 2018/01/29
Radio and general (Seq 1) FY2018 2018/03/03
Television (Seq 1) FY2018 2018/04/07
Number of distributions
Live (Seq 1) FY2018 2018/04/17
Supplementary NS1 (Seq 2) FY2018 2018/04/25 23*
Post (Seq 6) FY2018 2018/05/07 (2017: 31)
Performance adjustment FY2018 2018/05/23
(Seq 2)
Mobile and internet FY2018 2018/06/01
transmission (Seq 1)
Post (Seq 7) FY2018 2018/06/21
Royalty adjustment (Seq 2) FY2018 2018/06/25
1
NS is an abbreviation for Non-Société. This means the work or a share of that Total group licence revenue
work has been used belongs to a composer who is affiliated to any society at
the time of distribution.
(before deductions)
R488,9 million
OUR PERFORMANCE IN NUMBERS (2017: R483,7 million)
GROSS GROUP TOTAL INCOME – 10-YEAR VIEW (Rm)
* Number of distributions decreased due
600000 to increased efficiencies in distributions
516,7 processes as well as certain post distributions
being consolidated.
480000 426,6
360,3
360000
240000
120000
2008 2013 2018
Year
Integrated Report 3
2018 AT A GLANCE CONTINUED
R273,7 million R200,7 million
(2017: R308,1 million) (2017: R214,4 million)
Total distributions Total distributions paid to
our members
R72,9 million 16 649
(2017: R93,7 million) (2017: 10 500)
Distributions to foreign societies Twitter followers
54 710
(2017: 42 766)
3 862
Instagram followers
Facebook followers
11 200 members R46 million
(2017: 10 500) (2017: R38,7 million)
Notes magazines distributed to Cleared undistributed royalties
members (undoc)
10 746 members 17 301*
(2017: 12 375) (2017: 20 408)
Electronic communication via the Total licensees
Beat Bulletin newsletter (members)
74 per day 13 452
(2017: 94) (2017: 9 539)
Walk-ins at SAMRO Place Members who manage their
accounts online
66% 34%
(2017: 70%) (2017: 30%)
Membership applications Membership applications from
received at SAMRO Place contract centres
4 121
(2017: 3 310)
92,7%
Accounts managed by the (2017: 96%)
publisher services team Query resolution
* Total licensees reduced as a result of licensee review as part of operating effectiveness assessment processes carried out internally.
WHY BECOME A MEMBER
Through its relationships with international collecting societies, SAMRO provides a valuable service
to over three million music creators worldwide.
Distribution of royalties (highlight distribution cycles)
SAMRO Funeral Benefit Scheme
SAMRO Retirement Annuity Fund
oin forces in lobbying for Copyright Amendment Bill that best suits music creators
J
AMRO collects royalties worldwide and across South Africa, ensuring that your music
S
rights are represented and measured at the correct value countrywide
Member application and registration is free
ORGANISATIONAL REVIEW
16 374 SAMRO represents
more than
South African composers
four million
and publisher members
composers and OUR PURPOSE
(2017: 14 961) authors • To create value for
across the globe the creators and users
of music
2001 employees
• To protect the
67% African intellectual property
rights of writers,
13% coloured composers and music
publishers by licensing
7% Indian ESTABLISHED music users
11% white 1961 • To ensure that
members whose works
SAMRO was established in 1961 as a are broadcast and played
2% foreign company limited by guarantee. Its commercially are paid
members comprise southern African their royalties from
composers, authors and music licence fees collected
publishers. When the new Companies
OUR VISION Act was promulgated, SAMRO members
by SAMRO
• To actively promote
To be the global elected to move from a company limited
music rights by guarantee to an NPC. Since inception,
SAMRO has delivered services
the value of copyright
and value-added to its members on a
services not-for-profit basis.
organisation of
choice for Africa
Rights
administered
OUR VALUES by SAMRO2
• Accountability PERFORMANCE
• Achievement OUR STRATEGIC THEMES RIGHTS
• Integrity SAMRO is a member-centric A performance rights
• Service excellence organisation that thrives on a high- licence allows musical
efficiency and high-performance works to be broadcast,
• Teamwork
culture. This enables us to successfully performed in public and
execute our strategic themes: transmitted by a diffusion
service. The licence fees
• Optimisation of the business model collected for this use are
• Diversification paid as royalties to music
composers, authors,
• Innovation
publishers and affiliated
societies
1
AMRO has 200 permanent and 17 contract employees.
S
2
SAMRO no longer administers mechanical rights and needletime rights. Mechanical rights are administered by the Composers, Authors
and Publishers’ Association (CAPASSO) and following the Performers Organisation of South Africa’s (POSA) merger with the South
African Music Performance Rights Association (SAMPRA), needletime rights are now administered by SAMPRA.
Integrated Report 5
CHAIRPERSON’S REPORT
SAMRO was established to be a world-class collective management
organisation (CMO) that protects the rights of composers and authors across
the world. In 2018, we focused on aligning the organisation to its core purpose.
SAMRO is focused on being a member-centric organisation that is transparent
and well governed under the guidance of the board, Nothando Migogo and
the executive team.
The board approved the new strategy which it formulated in collaboration
with executive management. The strategy has three themes: optimisation of
the business model, diversification and innovation.
OUR OPERATING ENVIRONMENT
In 2017, South Africa’s entertainment and media revenue increased by 6,8% year-
on-year to R129,2 billion1. Increased accessibility to the internet and digitalisation
contributed significantly to revenue growth. This trend is expected to continue
and will impact the traditional business model which SAMRO relies on. The
internet is becoming the preferred platform for advertisers due to its compelling
ability to capture and engage audiences. Currently, broadcasting (television (TV)
and radio) constitutes 67% (2017: 66%) of SAMRO’s licensing income.
We are committed to unlocking all licensing opportunities related to the use
of music. We are particularly targeting the online sales market and assessing
live music and local government.
The rate of digitalisation in our industry requires us to have a reliable information
technology (IT) platform that delivers on our members’ needs by providing
accurate, reliable and user-friendly information. Zeus upgrades went live in
December 2017 but the platform is not yet at the desired standard. The IT team is
working to catalyse our IT system to be more reliable, accurate and user-friendly.
Due to the tough economic conditions in South Africa, there are numerous
licensees who have delayed or avoided payment. We currently have
R72,6 million as a bad debt provision.
The impending Copyright Amendment Bill could alter our regulatory compliance
requirements, reporting requirements and provide extended user rights.
A CULTURE OF GOOD GOVERNANCE
AT SAMRO
SAMRO is committed to ensuring good governance policies and structures (pages
42 to 44). A fundamental element which will drive the organisation forward is a
unitary board with appropriate skills, experience and diversity. Membership issues
occupied a significant part of our agenda in that there is currently one independent
non-executive director on the board. However, we have set a target to ensure that
the board consists of at least three independent members by 2020.
We reviewed our policies and performed a board evaluation process. Most notably,
the remuneration policy was comprehensively reviewed to ensure alignment with
the company’s strategy while driving employee performance. The board evaluation
process identified areas which we need to strengthen, and specific training was
allocated to directors. Other aspects, such as the delegation of authority to
committees and our meeting arrangements, are being closely assessed to optimise
their efficiency and value contribution to the board.
1
PwC: Entertainment and media outlook: 2018 to 2022 – An African perspective.“WE ARE COMMITTED TO UNLOCKING ALL
LICENSING OPPORTUNITIES RELATED
TO THE USE OF MUSIC.”
JERRY MNISI
Integrated Report 7CHAIRPERSON’S REPORT CONTINUED
Our ability to attract and retain talent contributes to our TRANSFORMATION
sustainability. The CEO and CFO recruitment processes The social and ethics committee
outlined the scarcity of skills in our industry. We are improving seeks to address non-compliance
our succession planning process to ensure reliable and other challenges that SAMRO is
contingencies are in place to manage future vacancies. facing with its scorecard. SAMRO’s
The board is satisfied that it performed its duties according to its aim is to achieve a level 4 broad-
charter. Improvement areas have been identified and we will based black economic empowerment
continue to work towards improving our standards of governance. (BBBEE) rating in the next two years.
The organisation’s BBBEE rating
ENGAGING WITH OUR impacted our licence income
STAKEHOLDERS performance due to licensees resisting
to settle their accounts due to our
SAMRO engaged with members regarding the company’s lower BBBEE compliance level.
membership rules to address issues such as the discrepancies
over the various levels of membership. A task team has been In 2018, the appointment of black
established to educate members on SAMRO’s legal content women at executive management
which is difficult to understand. Additionally, the team will level contributed to the improvement
assist in the development of social security systems for of our scorecard.
members who are no longer as economically active.
We also continued to engage with government on the OUTLOOK
Copyright Amendment Bill by submitting our recommendations Our industry and South Africa’s
to parliament. During the reporting period, parliament macro-economic outlook will remain
deliberated on the submissions and proposals made by various volatile due to the national elections
stakeholders in the music and arts industries. in 2019. We will continue striving to
improve brand reputation and to
In 2014/15, we identified the AEMRO investment as an opportunity. develop our stakeholder inclusive
We hoped it would fulfil our diversification objective and approach in line with King IV.
contribute to licensing revenue growth, especially at a time when Management will continue realigning
growth was lagging. Unfortunately, the investment did not benefit the business to the back to basics
our members as we predicted. In hindsight, we recognise that we approach and evolving within the
could have taken preventive measures, such as conducting competitive environment.
sufficient due diligence. We are committed to transparent
disclosure regarding the shortcomings of the investment decision.
As such, PwC conducted an initial investigation, and findings APPRECIATION
from the second, forensic, investigation by Sekela Xabiso were In conclusion, the AGM held on
presented to SAMRO members. For financial information relating 11 December 2018 will be my final
to this investment, please refer to the CEO’s report. duty as a board member. It has been
an honour and a humbling experience
to serve SAMRO in various capacities
THE SAMRO FOUNDATION throughout the years. My gratitude
The SAMRO Foundation plays a pivotal role as our corporate goes to my fellow board members,
social investment (CSI) arm. In November 2017, maestros management and employees for their
Kutlwano Masote and Nomfundo Xaluva were elected as contribution. I have confidence in
chairman and vice-chairman respectively. The SAMRO Foundation management and the new board that
focused on promoting South African music, the notation of they will deliver on SAMRO’s strategy.
indigenous music and the reallocation of music investment
resources in 2018. Furthermore, over R3 million was allocated to
our partner organisations and to bursaries at tertiary institutions.
The Concerts SA (CSA) project no longer receives long-term
three-year funding from the Norwegian Embassy, and our
contracts declined on a year-on-year basis due to fiscal Jerry Mnisi
pressures in Norway. ChairpersonOUR VALUE CREATION PROCESS
Members entrust their musical rights to SAMRO. Our primary role is to administer these rights on their
behalf by collecting licence fees and distributing royalties earned.
SAMRO’s administration function entails licensing and collecting fees from music users (such as television
and radio broadcasters, live music venues, retailers, restaurants, promoters and shopping centres) who
reproduce, distribute and adapt the works of our members. These fees are then distributed to members
as royalties during our annual distribution cycles (after administration costs are deducted).
INPUTS
• Composers, authors and publishers:
o 16 374 members
o New membership applications:
– 66% (2017: 70%) received at SAMRO Place
– 34% (2017: 30%) from contact centres
ACTIVITIES
Administers Copyright protection Artist support
performing for composers and authors’
and industry
works, and lobbying activities to
rights collection development
positively influence through the SAMRO
music industry and Foundation (page 23),
copyright legislation support of SAMRO
affiliates/CMOs
OUTPUTS
• Distribution of royalties for the works of artists
• 4 121 (2017: 3 310) accounts managed by the publisher services team
• 10 746 (2017: 12 375) electronic communication via the Beat Bulletin newsletter
OUTCOMES
• R273,7 million (2017: R308,1 million) total distributions
• R200,8 million (2017: R214,4 million) total distributions paid to our members
• R72,9 million (2017: R93,7 million) distributions to foreign societies
• R46 million (2017: R38,7 million) cleared from Undoc
• 23 distributions (2017: 31 distributions)
Integrated Report 9OUR VALUE CREATION PROCESS CONTINUED
SAMRO DALRO
SAMRO is a membership-based organisation and its DALRO, SAMRO’s largest subsidiary, has been operating
core function is the administration of various types of since 1967 and licenses the reproduction of literary,
intellectual property works in copyright, governed artistic and dramatic-musical works, and offers a range
by the Copyright Act, 98 of 1978, as amended. SAMRO of related services1. Members legally assign their rights
also owns a property-holding company in which SAMRO to SAMRO, while DALRO acts on an agency basis for its
Place is housed. The organisation’s main revenue is members.
derived from licensing the rights of music composers,
DALRO’s main source of revenue is the administration of
authors and publishers. This includes licensing the
reprographic rights, although the organisation is
SAMRO repertoire of musical works for broadcast,
developing other revenue streams in copyright licensing
performance in public and transmission through a
and related fields. The organisation developed tariff and
diffusion service.
licensing instruments for licensing these rights to private
Composers, authors and publishers assign their rights and public sector businesses, particularly universities
to SAMRO for licensing purposes. In return, SAMRO and more recently media monitoring services. Licensing
distributes royalties after collecting licence fees from schemes were also developed for visual works of art and
users of copyright works (such as broadcasters) and the adaptation of books for film and TV productions.
deducting administration costs for this service.
SAMRO provides composers, authors and publishers
from foreign territories with the same service through
a system of bilateral agreements for reciprocal
representation with similar organisations throughout
the world. SAMRO also receives distributions from these
international organisations when our members’ works
are performed in their countries.
THE SAMRO FOUNDATION NON-ROYALTY COMMERCIAL ENTERPRISES
The SAMRO Foundation is an NPC housing the CSI This area of the business houses the group’s activities
portfolio of SAMRO. The SAMRO Foundation’s activities that focus on generating non-royalty revenue to
aim to promote South African arts and encourages a diversify the sustainable revenue stream for its members,
culture of excellence and music education in the arts including rental from SAMRO Place.
while supporting the local music industry through a
diverse range of programmes (pages 22 to 27).
1
dministration of reprographic reproduction rights (from published editions), public performance rights (including stage rights for
A
musicals and plays) and reproduction rights (granted for both publishing and copying) in works of visual art.11
Pixel Kollective x Homecoming Events
Integrated ReportOUR VALUE CREATION PROCESS CONTINUED
STAKEHOLDER ENGAGEMENT
SAMRO engages with stakeholders to ensure the transparency and accountability of our business.
The levels of power and influence of each stakeholder group differ. SAMRO aims to build and maintain relationships that
achieve shared value by communicating transparently, promptly and effectively with all stakeholders. Our high-level
stakeholder engagement feedback discussions for 2018 are highlighted in the reports of the chairperson (page 6) and
CEO (page 16).
We engage with our key stakeholders through various meetings, our website, online platforms and
specific industry conferences and events.
STAKEHOLDER STAKEHOLDER EXPECTATIONS/CONCERNS GROUP RESPONSE
Composers, • Outdated membership rules • Roundtable sessions and an extraordinary
authors and • Ineffective communication general meeting (EGM) dedicated to
publishers membership rules and member information
• Transparency in royalty payment process around AEMRO
• CEO engagements
• Appointed a task team to deal with
membership-related matters
Broadcasters • Adherence to local music initiative • Piloting the media monitoring solution for
• Inaccurate distributions TV and radio
• Unfair distributions
Employees and • Employee wellness • SAMRO conducted a strategy session for
unions • Fair remuneration staff in August 2018
• Increased transparency • Engagements with employees on cost to
company packages
• Engagements with the Commission for
Conciliation, Mediation and Arbitration
(CCMA)
• Wage negotiations with the Communication
Workers Union (CWU)
Government • Compliance with regulatory requirements • Participated various engagements with
• Advising government with policy and industry and government players
legislative changes • Various meetings with key individuals to
• Transparency of distributions establish a strategy to unlock licensing
opportunities
• Formation of Copyright Alliance to best
respond and provide legislative input in the
Copyright Amendment Bill process
Membership • Protection and enforcement of copyright • Various memberships and alliances
organisations and other intellectual property rights • SAMRO is a founding member of the
• Copyright Amendment Bill Copyright Alliance
Fellow Africans • Mutually beneficial relationships • Visits by CEO and other management
collecting • Need for enforceable and fair copyright members to various countries on the
societies laws across the continent continent to build strong relationships
• CEO was elected president of the
International Confederation of Societies of
Authors and Composers (CISAC) Africa,
positioning her well in the drive to identify
and address areas of concernMEMBERSHIPS
SAMRO has memberships and affiliations with organisations that protect and enforce copyright and
other intellectual property rights.
MEMBERSHIPS
SAMRO
CISAC
Bureau International des Sociéties Gérant les droits d’Enregistrement et de Reproduction Mécanique (BIEM)
DALRO
International Federation of Reproduction Rights Organisations (IFRRO)
ONLINE PRESENCE AND SOCIAL MEDIA
Our website contains vital member-related information, such as:
• Licensing application forms
• Distribution schedules
• Various types of rights and memberships
• Relevant links to other information
Our website also hosts the Member Portal, enabling members to manage their SAMRO accounts online.
Members can view and update personal information, notify works and view accurate current and historical
account statements. In 2018, 82,1% of our members (2017: 63,7%) are registered online. Of these members,
70% actively use the platform.
SAMRO engages with members on social media platforms such as Facebook, Twitter, Instagram, and
YouTube in order to inform them on any pertinent matters that they may need to be aware of. The
SAMRO Foundation utilises Facebook, Twitter and YouTube to share the performances of scholarship
winners and other beneficiaries. CSA’s information is available on its website and it also has a social media
presence on Facebook, Twitter, YouTube and SoundCloud.
Integrated Report 13OUR VALUE CREATION PROCESS CONTINUED
MATERIAL MATTERS
Our material matters are matters that can substantially impact the company’s ability to create sustainable
long-term value. We determine our material matters by assessing the operational risk log, and the local
and international macro-economic environment. The table below lists matters that are considered most
material to SAMRO:
MATERIAL MATTERS DESCRIPTION HIGH-LEVEL FEEDBACK
Membership Ability to increase distributions in line SAMRO is working on various initiatives to
with membership growth ensure members receive maximum benefit.
We aim to improve our royalty payout rate by
ensuring efficient frequency and reduced
undoc balances.
Board composition Alignment with corporate governance SAMRO will ensure that the board comprises a
codes sufficient skillset and is appropriately balanced
with an adequate number of independent
members.
Legislative changes Business model relies on existing The lies uncertainty surrounding the new
legislation copyright legislation, which could impact
SAMRO’s business model.
The regulation of societies is being There is a likelihood of government enforcing
intensified regulatory changes that would result in CMOs
having to report to government on
performance and processes.
Costs AEMRO investment AEMRO investment was wound up as a result
of infeasible overheads and a lack of conducive
legal framework, amongst other things. This
assisted with containing our spending at group
level.
Regulation requiring improved efficiencies SAMRO anticipates regulation to enforce strict
rules on society which will assist in driving
higher distributions to composers, authors and
publishers. It is anticipated that regulation will
be 20%. Our cost-to-income ratio was 40% and
our target is to reduce this to 20% by 2022.
Licensing The public broadcaster’s payment Liquidity issues at the public broadcaster are
patterns expected to persist. This situation will continue
to affect our licensing income.
Licensing initiatives We are addressing the simplification of tariffs
to streamline our licensing process.
Empowering music users to understand the
value of music and its importance in their
business.
Lack of adequate copyright legislation for Collaborating with mechanical music rights
new media (CAPASSO) to create licensing solutions for
digital service providers.STRATEGY
In support of the group’s vision, we have established three strategic themes:
1. OPTIMISATION OF THE BUSINESS MODEL
The optimisation of operations and processes in areas
such as invoicing, sales and credit control enables
SAMRO to increase value for members and grow
licensing revenue. Negotiating favourable tariffs is
crucial to ensure that we derive sufficient licensing
revenue from our licensees. Providing a more member
and licensee centric service.
2. DIVERSIFICATION
Working with strategic partners in order to
increase licensing and collection in other
African territories. Providing value added
services for members as well as tech driven
customer solutions.
3. INNOVATION
SAMRO intends to be a dynamic and future-orientated
company which understands members’ wants and needs.
We will consistently monitor trends such as digitalisation
and ensure that we respond effectively. Our approach
to innovation enables us to be a business which
gains the affinity of members by offering great value
in the changing landscape.
Integrated Report 15CHIEF EXECUTIVE
OFFICER’S REPORT
WELCOME TO THE 2018
SAMRO integrated report
SAMRO is on a drive to reinforce its role as a
transparent and accountable entity serving the best
interests of its members.
In 2018, our membership base increased to 16 374 members
as we continued to diligently administer rights, collect
licence fees and distribute royalties.
SAMRO’s total income decreased by 1.7% to R516,7 million
(2017: R525,6 million). The decrease was significantly
influenced by the decline in our licensing revenue – which
constitutes 95% of our total income.
LICENCE AND ROYALTY INCOME
2%
30%
38%
30%
Foreign Radio General TV
TOTAL INCOME (Rm)
600
525,6
500 477,9 516,7
489,1
453,5
403,5
400
354,5 375,4
315,9
348,4
300
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Amount“THE COMPANY IS DEDICATED TO PROACTIVELY
ADDRESSING OUR MEMBERS’ UNIQUE NEEDS
AND DELIVERING ON THEIR EXPECTATIONS.”
NOTHANDO MIGOGO
Integrated Report 17CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
General licensing income decreased by 0.6% due to market distributions related to works in the
constraints and slow business growth. Furthermore, businesses public domain. We increased
have closed down due to economic pressures and defaulted member awareness of the amended
on payments. The poor performance was also driven by membership criteria, our nomination
reduced market confidence in SAMRO due to negative media, committee engage on board
an outdated sales strategy as well as inefficient licensing and composition issues and a dedicated
collecting processes. These were key focus areas during department, comprising six
the period. employees, was introduced to
administer undoc.
Despite delayed payments from the public broadcaster, total
broadcast revenue increased by 3,3%. We also faced challenges Our involvement in the Copyright
to secure a tariff increase during the year. However, an increase Alliance enables us to continually
for an annual licence fee worth R80 million (2017: R55 million) lobby and engage with government
excluding value added tax (VAT) with a private broadcaster is regarding the development of the
in its final negotiation stages. Copyright Amendment Bill. The bill
threatens DALRO’s continued
The board and management revised the strategy to optimise
operations due to extensive
the company’s current business processes, diversify
educational exceptions.
appropriately, and pursue innovation. These objectives will
enable us to become a member-centric organisation which SAMRO sponsored the 2018 South
achieves increased distributions, efficiency and revenue. African Music Awards (SAMA) held
on 2 June 2018, and presented the
We strengthened our management team with agile and
SAMRO highest airplay special
motivated individuals who are professionals in their field and
composer award. The Wawela Music
have solid knowledge of the industry and our members’
Awards were postponed to 2019.
interests. The enhanced competencies of our management
team will be an integral driver of our business in future. OPTIMISATION OF THE
The company is dedicated to proactively addressing our BUSINESS MODEL
members’ unique needs and delivering on their expectations. SAMRO collected R471,9 million
We held two EGMs during the year which gave us the (2017: R465,6 million) in licence and
opportunity to address membership rules, the lack of royalty income and distributed
independent members on our board and unprocessed R273 million (2017: R308,1 million) in
royalties. Although our revenue
COST-TO-INCOME RATIO (%) increased the impact of AEMRO
40,0 (approx R9m) and Bad Debts
38,6
Provision (approx R31,6m) affected
our distributable income in the
current period. R127,3 million (2017:
35 R127,9 million) was generated from
renewals and R11,5 million (2017:
R11 million) was generated from new
business. Containing our expenses
enabled us to perform comparatively
29,1
27,6 27,6 better than the prior year, however,
26,4 27,5 changes in the accounting of our
25,7 27,4
26,5 internally generated assets still
25 affected overall costs and led to
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
cost-to-income ratio of 40%
*
2017 -Amount
The cost to income ratio is high because of the impairment loss related (2017: 38,6%).
to the investment in the UAE
018 - The cost to income ratio is high because of the impairment loss related
2 We are negotiating towards a single
to the investment in the UAE, writing off the POSA loan and other intangible music rights licence between
assets. The change in accounting estimate related to the custom built SQL
Database also contributes to the increase in expenses which has an adverse SAMRO, Recording Industry of
effect on the cost to income ratio. South Africa (RISA), CAPASSO and
1
36% excluding AEMRO costs.SAMPRA. This could assist our DISTRIBUTIONS (Rm)
licensees by reducing the number of350
parties and contracts they would
326,9
have to engage with, allowing the
310,2
licensing process to be simple and
efficient, and resulting in more300 305,4
royalty income across the industry.
272,7
Beyond the strategic realignment, 273,0
we aim to implement robust internal 261,7
250 245,9
controls and enhance SAMRO’s
231,2
reputation.
LICENCE INCOME SOURCES (Rm) 241,4 211,2
200
500 461,6
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
452,1
436,2
Royalty distribution Grant of rights
400
300
200
100
13,1 13,6 10,3
2016 2017 2018
Performing rights
International rights
DIVERSIFICATION
Foreign income declined by 24,3% FOREIGN INCOME BY REGION (Rm)
to R10,3 million (2017: R13,6 million)
due to the fluctuating exchange rate 8,6
and timing of revenue receipts from
foreign societies. SAMRO maintained 8
its focus of promoting South African
repertoire to overseas markets. This 6
enables SAMRO to collect royalties
from other societies. 4 3,6
SAMRO’s investment income
decreased by 54% to R17,3 million 2
(2017: R37,7 million). We assumed a 0,4 0,7
cautious investment approach due 0,1 0,1
to the subdued macro-economic South Oceana North Asia Africa Europe
conditions and political uncertainty. America America Pacific
The group deposited its excess cash
2017 2018
into short-term unlisted investments
such as call accounts and fixed
deposit accounts.
Integrated Report 19CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
In 2014/15 the AEMRO investment was identified as an APPRECIATION
opportunity to diversify our revenue streams. We encountered
Our members and stakeholders are
unfeasible investment costs, constraints in obtaining a trading
the core of our purpose and we are
licence from the United Arab Emirates (UAE) local government,
grateful for their continued support.
from rights owners and other societies within CISAC. As a
result, we resolved that it would be prudent to wind up the I thank all SAMRO employees for
investment. A total of R48 million was written off and their positivity, resilience and
investigations from PwC and Sekela Xabiso were commissioned dedication during our transitional
to gain full insight of the matter. period. The board’s contributions,
guidance and oversight were pivotal
INNOVATION and the executive committee played
Technology supports our distribution capabilities. It is vital to an enormous role in persevering and
ensure that our technology platform is appropriately equipped driving the company forward.
to accommodate our members’ needs for faster and more
accurate reporting which in turn leads to improved distributions.
Despite upgrades going live in December 2017, Zeus, in its
present state, remains ill equipped to fully meet these
requirements. The radio and general distribution processing was
affected by a glitch in the upgraded Zeus system. A committee
Nothando Migogo
was established to review and prioritise technology
CEO
improvements in the business model and we spent R7,5 million
this year on technology and information system upgrades.
We collaborated with reputable service providers to implement
a pilot broadcast monitoring system and we are exploring the
possibility of partnering with other service providers that will
process music usage data for mobile and internet users.
Although this service will be outsourced, we intend to integrate
it onto our systems to enhance efficiencies.
OUTLOOK
SAMRO aims to remain dynamic and to maintain an
understanding of our members and stakeholders’ expectations.
Embedding the new strategy and enhancing our technology
capabilities will be crucial in our increasingly digitalised
environment. These components will enable the company to
achieve improved efficiency and financial health characterised
by increased revenue growth, distributions and ultimately an
improved cost-to-income ratio.
Acquiring licensing revenue will be challenging going forward
and will require a keen emphasis on dormant markets and tariff
realignment to adequately cover all music usage by existing
licensees. Further, the imminent technical recession and
negative media sentiment only increase the licensing challenge.
The amended membership rules, the possibility of improved
board composition and the impending copyright legislation
are other factors which could impact our future performance.VALUE ADDED STATEMENT
SAMRO created and distributed R519 million of wealth in 2018 (2017: R550 million). Distributions for
member benefit, in the form of royalties, retirement annuity and funeral benefits, endowments
for the national arts and other social and cultural allocations, decreased by 3% to R418,4 million
(2017: R429,9 million).
Payment to employees in the form of salaries, wages and benefits decreased by 5,2% from R115 million to
R109 million (2017: R115,1 million). This represented 26,2% of total value distributed. Providers of capital
received R2,6 million this year and taxation paid to government totalled R5,2 million.
No withdrawals were made from reserves this year (2017: R18,3 million).
GROUP
2018 2017
R000 R000
Music licence and royalties 471 983 465 615
Reprographic licence and royalties 52 353 51 866
Administration and other fees 27 429 22 322
Cost of generating revenue (109 895) (78 913)
Value added 441 870 460 889
Income from investments 17 267 37 705
Distribution adjustment 60 194 51 804
Wealth created 519 332 550 399
Value distribution
Members
Music royalty distributions 313 216 310 180
Reprographic royalty distributions 52 353 51 866
Grant of rights payments 23 645 41 617
SAMRO Retirement Annuity Fund (SRAF) and members’ funeral benefit 8 622 9 161
SAMRO Foundation allocation 20 297 16 810
Other social and cultural allocations 314 315
Employees
Salaries, wages and benefits 109 796 115 145
Providers of capital
Finance costs 2 647 2 542
Government
Taxation charge 5 221 4 510
Reinvested in the group
Depreciation and amortisation of capital items 32 135 9 155
Transferred from reserves (25 499) (29 618)
Retained earnings/(losses) (23 417) 18 716
Total 519 332 550 399
Integrated Report 21OUR SOCIAL IMPACT
SAMRO plays a pivotal role in Africa as a driver of the creative economy.
2018 CSI IN NUMBERS
Over More than 84 overseas scholarships for young Over 2 200 bursaries were awarded to all
R140 million musicians have been awarded since 1962. The university music departments in South Africa.
invested in the scholarships alternate annually for different In 20181 the bursary amount was increased to
arts since 1962. disciplines such as composers, singers, R12 000 per student.
instrumentalists and keyboard players. This
applies to both western art, music and jazz.
We supported Over 64 500 original South African works Over 600 live music venues were surveyed
48 music have been archived, the bulk of which are in projects by CSA.
schools, and original handwritten manuscripts.
the inaugural
Mzilikazi
Khumalo
Bursary granted
R30 000 to
support a
student reading
her master’s in
indigenous
music.
Since 2013, the More than 400 new South African music 16 partner venues were supported, and in total,
CSA project works commissioned. 300 venues were reached.
contributed to
the income of
over 5 000
artists, reaching
an audience of
over 250 000
people.
We supported The Music Mobility Fund3 received over
nine universities 900 applications and supported more than
and two 160 tours through nine funding rounds since
orchestras to its inception in 2013.
perform South
African
compositions2.
1
9 music bursaries awarded.
9
2
These included compositions by Dizu Plaaitjies, Andile Khumalo, Sibusiso Mashiloane, Errol Dyers and Gloria Bosman.
3
Artists who have benefited include Freshlyground, Madala Kunene, Moonchild Sanelly, Samthing Soweto, DJ Lag, Bombshelter Beast, The
Brother Moves On, Sibot, Taxi Violence, Sibusile Xaba, Msaki, Native Young and Make-Overs.
SAMRO has been promoting the sustainability of artistic communities and music for over 60 years.
We represent and support musicians and artists by protecting their livelihood and providing professional
counsel and guidance. SAMRO is a membership-based organisation able to influence arts policy at
government level, preserve our musical heritage and build the capacity of arts organisations. Our
employees’ collaboration and commitment are pivotal drivers in our pursuit of excellence (page 31).
SAMRO’s corporate citizenship philosophy is based on the Freedom Charter and is closely related to our
commitment to stakeholder development. These values have been the foundation of our corporate
culture since 1962.CSI projects are managed by the for the National Arts (SENA), a subcommittee of the board
SAMRO Foundation and are that operated until 2011. The SAMRO Foundation, established
concentrated in the areas of: in 2012, emerged from SENA and is a semi-autonomous non-
profit organisation (NPO). The SAMRO Foundation is fully
• Music education programmes
registered as a public benefit organisation approved for
• Music heritage section 18(a), meaning contributions are tax-deductible in the
• Conservation and promotion hands of donors. The SAMRO Foundation has a team of
through the SAMRO music dedicated and passionate individuals who work relentlessly to
archive successfully execute numerous projects.
• Music/cultural industry support Since inception, the Foundation has invested more than
through the SAMRO Stakeholder R140 million in supporting and nourishing the South African
Hub cultural landscape through bursaries, scholarships,
commissions, the preservation of music heritage and other
SAMRO allocates 8,3% of operational
industry enrichment projects. The Stakeholder Hub continues
profit before distribution and tax is
to benefit creative industry organisations and our live
allocated to the Foundation, the
performance initiative, CSA. CSA has played an instrumental
SRAF and the SAMRO Funeral
role in the betterment of music in southern Africa through
Benefit Scheme. This is in
increased partnership, diversity, range and scope. New
accordance with the provisions
partnerships in the Netherlands, the United States of America,
contained in the standard CISAC-
Germany and France have changed the scope of our global
approved reciprocal agreement. The
relationships.
SAMRO Foundation allocates funds
to projects annually. The board Our large archive of musical scores is now available online. This
receives feedback on activities and is an accessible platform to preserve, promote and support
progress at all board meetings and southern African musicians through the SAMRO Music Archive
funds are allocated transparently. Online Portal. The Indigenous African Music (I AM) transcription
projects, funded by the US Ambassador’s Fund for Cultural
THE SAMRO Preservation, are also playing a role in the advancement of
African music. These platforms give southern African
FOUNDATION composers the opportunity to publish and sell their works to
The SAMRO Foundation’s ethos global markets.
can be summarised as “roots to
fruits”, with a strong emphasis on
ploughing resources back into the
communities in which we operate,
so those roots will bear new fruits.
SAMRO’s sustainability perspective
is driven through its corporate social
responsibility activities and the
social and ethics committee. The
group’s CSI initiatives are channelled
through the SAMRO Foundation,
which provides investment support
for music education and the
development and promotion of
South African composers, authors
and artists.
The SAMRO board took on CSI
responsibilities in 1962 but in 1996
founded the SAMRO Endowment
Integrated Report 23OUR SOCIAL IMPACT CONTINUED
SAMRO FOUNDATION FOCUS AREAS
The SAMRO Foundation affirmed its commitment to the arts in South Africa by focusing on five strategic
areas, implemented through the projects outlined in the table below:
STRATEGIC
FOCUS AREAS OBJECTIVES PERFORMANCE FEEDBACK
Encouraging • Return on investment • Growth in careers of artists who have been
excellence in • Brand awareness beneficiaries of the Foundation’s initiatives
the arts • Appreciation messages via email or social
• Goodwill
media expressing gratitude, and impact of
funding or platform on performing composer
and/or author members
Facilitating • Improved cooperation in sector • 900 artists benefited
economic • Economic growth in sector • 16 partner venues supported
participation
in the creative • Formalisation of the sector • 300 venues impacted
economy • Increase in platforms • 80 000 audience members attended CSA
events
• 400 concerts held
Promoting living • Increased awareness of southern African • Visits from academic researchers such
cultural heritage culture/music as Christine Lucia, Thomas Pooley and
• Increased awareness of archived works Andile Khumalo
• Increased commissioning of new works • Client attendance at the World Choir Games
and the Johannesburg Festival Orchestra
• International access
• Commissioning of 12 new works by SAMRO
members
• Incorporation of the David Polecutt scores
collection into the archive
• Two SAMRO scholarships winners, Ntandu
Ngcapu and Darren English, represented
South Africa at the Amersfoort International
Jazz Festival
Influencing • Improved awareness of the music sector • Granted Christine Lucia access to archive
cultural and arts (internal and external) information which will assist with the
policy – through • Building on old research to provide a publication of her research on JP Mohapeloa
research and broader knowledge base • Participated in policy discussions including
advocacy consultations for the white paper on arts and
• Representing musicians at related policy
events culture and the indigenous knowledge bill
• Influenced the white paper on arts and
culture to acknowledge the need for
improved live music support
Building capacity • Improved professionalism in sector • Supported numerous organisations in the
and Institutional • Improved income generation to recipients music sector through micro-grants
strength of arts • Developed a refined policy to ensure
organisations • Improved compliance in the sector
effective support for stakeholders and
assisted them with compliance
• SAMRO Talks commenced to help young
music entrepreneurs navigate the music
ecosystemMUSIC CONSERVATION, CSA
PRESERVATION AND The SAMRO Foundation receives financial, administrative and
technical support from the Norwegian Ministry of Foreign
PROMOTION Affairs (MFA), SAMRO and Concerts Norway. This relationship
The SAMRO Music Archive houses resulted in the formation of CSA in 2013. CSA partners with
approximately 64 500 scores written musicians, promoters, venue-owners and audiences to build
by South African composers and music circuits and promote the mobility of southern African
members. These scores include artists. It focuses on live music performances at venues and
photographs, books, CDs and other schools in disadvantaged areas, as well as skills development
recordings. The archive is accessible for the music sector at large through workshops. Another
to the public and researchers for focus area for CSA is research, focusing on audience
academic, media and other purposes. development, live music environment and reviewing mapping.
Music industry incubator Through expanding our international portfolio of projects and
(INCUBINC) partners, CSA is represented at Live DMA (European network
INCUBINC is the leading creative for music venues and festivals). The team will also visit Oslo,
industry project accelerator in Africa Norway, in 2018 to meet potential partners. This could benefit
which address the need for the southern Africa region.
administrative and business support. CSA is constantly seeking funders in South Africa and
It aims to enhance the careers of internationally. The Norwegian Embassy extended its support
artists by promoting productivity, by another year and we submitted funding proposals to the
professionalism and profitable UNESCO-International Fund for Cultural Diversity, the National
products in our industry. Lotteries Commission and the National Arts Council.
The programme “Umhlambi Zenyathi” The CSA Mobility Fund awarded grants to 34 projects in 2018.
mentors and nurtures a defined range 12 tours were supported in the SADC region and 22 in South
of new artistic enterprises, involving Africa. The project continuously contributes to an income for
emerging and established artists hundreds of musicians and many support staff.
with defined products, projects or
programmes. There is a dedicated For more information, visit the CSA website at
team of scouts who search for http://www.concertssa.co.za.
artistic potential.
Integrated Report 25OUR SOCIAL IMPACT CONTINUED
Industry support – Stakeholder Hub
The SAMRO Foundation Stakeholder Hub is an initiative which consolidates the organisation’s commitment
to institutional development in the arts. Through administrative backing and infrastructure, the Stakeholder
Hub develops other arts organisations.
INTERNAL
PROJECT DETAILS AND SCOPE OF SUPPORT
Arts and Culture ACT is South Africa’s premier independent arts and culture funding and development agency.
Trust (ACT) Several focused funding and development programmes implemented by ACT support a broad
range of activities nationally. Through the professional development programme the trust
makes funding available to individual artists, practitioners and arts and culture organisations
and institutions in the form of once-off grants.
Academic and The SAMRO Foundation partnered with ANFASA to sponsor grants for authors with a specific
Non-Fiction interest in music research as part of the ANFASA Grant Scheme for Authors. SAMRO
Authors subsidised ANFASA’s rent for three years, but ANFASA now pays full rental costs.
Association of
South Africa
(ANFASA)
CASA1 The National Music Composers’ Workshops were supported by the National Arts Council
(NAC) and administered by SAMRO and the Foundation from 2013 to 2015. The funds granted
to CASA were used to run four national workshops for composers and musicians. The
workshops and reports to the NAC were completed and the final instalment was paid in
February 2016.
Music Pioneered by SAMRO in 2003, MOSHITO has become an independent entity and the largest,
Conference and most influential music industry trade fair and expo in Africa.
Exhibition
(MOSHITO)
Creative and CCIFSA is a representative body set up with the assistance of the Department of Arts and
Cultural Industries Culture for the cultural and creative sectors in South Africa. It was formed as an NPO to
Federation of promote and develop the social and economic interests of the cultural and creative industries
South Africa by acting as a representative body for these sectors.
(CCIFSA)
Musician MASA joined the SAMRO Foundation Stakeholder Hub programme in May 2016, taking over
Association of from SACA.
South Africa
(MASA)
1
Until its dissolution earlier in 2018.EXTERNAL
PROJECT DETAILS AND SCOPE OF SUPPORT
Arterial Network ANSA addresses matters of networking and advocacy in the arts.
South Africa
(ANSA)
Music in Africa MiA is a partnership between the SAMRO Foundation, the Goethe Institute and the Siemens
(MiA) Foundation.
Business and Arts BASA offers links and support between arts organisations and businesses in the form of
South Africa workshops and networking meetings throughout the year. André le Roux is a member of the
(BASA) board of BASA.
The African The African Cultural Heritage Trust is a national community-based non-governmental
Cultural Heritage organisation (NGO) that strives to protect and promote Amasiko/Ditso (Living Heritage). With
Trust the Zindala Zombili African Music and Dance Festival, it hosts a regular pan-African showcase
of traditional cultures.
The Puku The Puku Children’s Literature Foundation is an independent NGO whose core objective is to
Children’s bridge the literacy divide that confronts the majority of South African children. It develops
Literature dynamic and innovative programmes to improve the quality of children’s books and
Foundation recreational materials in all South African languages through print and digital means.
GOING FORWARD
In the next year, we will:
• Utilise all existing channels to improve communication with members
• Collaborate with the marketing and licensing department for businesses pitches
• Focus on strengthening relationships with current licensees and potential clients through licensee
roundtables
• Work towards developing a group brand persona and identity
Integrated Report 27You can also read
